Insurance Antitrust Case To Get High Court Hearing

High Court To Hear Appeal In Insurance Antitrust Lawsuit

The U.S. Supreme Court Monday agreed to consider a major antitrust case that attacks insurance industry conduct in the past and could change the way it does business in the future.

The court will hear an appeal by insurers trying to kill the case, brought in 1988 by attorneys general in 19 states, including Connecticut.

FOR THE RECORD - Kathleen E. Foote is a deputy attorney general in alifornias antitrust division. Her first name and title were cut from a story about a Supreme Court case on Page 1 of Tuesdays Courant.

Insurers, including two Hartford companies, are accused of conspiring in the mid-1980s to limit the number and kind of liability claims by businesses and municipalities that would be covered. The alleged action came during the insurance crisis of the 1980s, when insurers boosted prices and some customers couldn't find coverage at any price.

The high court was not expected to take the case, and its decision to do so underscores the far-reaching effect a ruling could have, both sides say.

The case was one of hundreds considered for argument by the court, which typically accepts only a small percentage of the petitions it gets. Also, the U.S. solicitor general had recommended that the court not take the insurance antitrust case.

Insurers, though not claiming victory, were pleased at Monday's announcement, while attorneys general say they don't believe they've lost ground.

Insurers are appealing a June 1991 ruling by the Ninth Circuit Court of Appeals in San Francisco that revived the case. The case had been dismissed in 1989 by U.S. District Court, but the states got the ruling overturned in appeals court.

correct what we believe were Ninth Circuit errors." Subsidiaries of ITT Hartford, Aetna Life & Casualty Co., and CIGNA Corp. are among the 32 defendants.

The attorneys general allege that the defendants conspired to limit coverage by forcing new policy forms on the rest of the industry and customers. The policies excluded coverage for pollution claims, for instance.

Insurers assert that their actions are exempt from antitrust prosecution under the federal McCarran-Ferguson Act, which grants them immunity unless they engage in boycott, intimidation or coercion.

One of the questions the Supreme Court will consider is whether insurers' conduct amounts to a boycott, as the states allege.

The high court also will decide whether U.S. insurers forfeited their right to immunity when they involved foreign reinsurers in the policy form issue. The states argued that domestic insurers lost their antitrust exemption.

In addition, the court will consider whether U.S. antitrust law can extend to foreign defendants in the case.

Reinsurance is crucial to U.S. insurers as a way of protecting themselves from unusually high claims. Insurers buy reinsurance by giving some of their premiums to other companies in the United States or abroad, along with some of the risk of paying claims.

The reinsurers in the case agreed to withhold reinsurance from companies that were unwilling to stick to the policy forms favored by the conspirators, the case alleges.

If the Supreme Court sides with the arguments of the attorneys general, the case will return to U.S. District Court for trial. However, a high court ruling that favors the industry wouldn't necessarily end the case, which could continue for years.

For instance, even with adverse rulings on their federal law claims, the attorneys general could fall back on claims they made under state antitrust laws.

Oral arguments are expected early next year and a decision by early July.

"We're not troubled in the least by the court's decision to hear these legal issues," said Connecticut Attorney General Richard Blumenthal. "We welcome a definitive decision on the issues before the court."

Antitrust experts have said the case is so notable because of the importance of insurers' limited exemption from antitrust law. The exemption, at least thus far, has permitted them to jointly collect and share data, propose rates, and develop policy forms.

The outcome of the case could reduce what insurers can do together, but they probably still will be allowed to share data on claims, predicted Kurt A. Strasser, a University of Connecticut law school professor who has followed the case.

The case continues at a time when Congress has been debating whether to gut the insurers' antitrust exemption. Many insurers, especially small ones, fear the making of any drastic changes in McCarran-Ferguson because the small companies cannot, on their own, perform all the data collection and analysis that insurers now do jointly.

The Supreme Court's agreement to hear the case doesn't signal which way the justices may be leaning. It only means that at least four of the nine justices said they were interested in hearing it.

"It's largely a reflection of the fact that the court took to

heart the argument [insurers] made that it's an important case affecting a substantial industry," Foote said. "I think that's all that can be read into it at this point."

Insurers had warned in a brief to the high court that if it didn't take the appeal, further proceedings "promise to be expensive and protracted, costing tens of millions of dollars and leaving the insurance industry in a state of paralyzing uncertainty for many years."

The case already has had a "chilling effect" on insurers' willingness to cooperate with one another, industry officials have said.

Aetna's only comment Monday on the Supreme Court action was: "We're pleased the Surpeme Court has agreed that the legal issues in the case are important enough to warrant Supreme Court review.